SUMMARY OF UK ANTI-BRIBERY LAWS

A reminder that the UK Bribery Act 2010 (the "Act") will come into force today. This is important because the jurisdictional reach of the Act is potentially very wide and goes further than the previous law.  As indicated below under 'Extra-Territorial Scope', it may apply to bribes paid anywhere in the world by any person performing services for the company.

For further details on the Act, see the anti-corruption e-bulletin that is prepared by the corporate crime and investigations team of Herbert Smith and which is available here.

What are the Four New Main Offences?

The Act repeals the existing legislation relating to bribery and creates four new main offences:

1.         The offence of giving, promising or offering a financial or other advantage to a person in circumstances where the offender:

·                     intends that advantage to be a reward or inducement for the improper performance of a function or activity; or

·                     knows or believes that the acceptance of the advantage would itself constitute the improper performance of that function or activity. (See section 1 of the Act.)

Note that the offence applies:

·                     whether the person receiving the bribe works in the public or private sector; and

·                     whether the bribe is promised or given directly or through a third party.

2.         The offence of requesting, agreeing to receive or accepting a financial or other advantage in circumstances where:

·                     the receiving party intends to perform a function or activity improperly, or

·                     intends that it should be improperly performed by another; or

·                    the request, agreement or acceptance would itself constitute the improper performance of a function or activity; or

·                    it is a reward for improper performance.

An offence may also be committed where a function or activity is in fact performed improperly in anticipation of or in consequence of requesting, agreeing to receive or accepting an advantage. 

Note that: 

·                    the above can be done by a person directly or indirectly through a third party;

·                    the advantage can be for the benefit of the requestor or for the benefit of another person;

·                     in certain circumstances it will not matter whether the requesting/receiving party knows or believes that the performance of the function is improper.  (See section 2 of the Act.)

3.         The specific offence of bribing a foreign public official occurs 
            where:

·                     a person intends to influence the foreign public official in his capacity as an official; and 

·                     intends to obtain or retain business or a business advantage; and

·                     offers or promises to give a financial or other advantage to the foreign public official or to another person at the foreign public official's request.  (See section 6 of the Act.)

Note that:

·                     there is no requirement to intend to influence "improperly";

·                     there is a wide definition of foreign public official;

·                     there would be a defence if the foreign public official was permitted or required by his local written law to be influenced by the offer, promise or gift.  This is likely to be of rare application.

4.         There is a new "strict liability" corporate offence of failure to prevent bribery.  The formulation of this separate offence was intended to address the practical difficulties of prosecuting companies in England for corruption.  Hitherto, a prosecutor has had to prove that the "controlling mind" of the company (e.g. the board of directors) participated in the corruption.  This is no longer necessary under the new corporate offence. 

A UK company or partnership (or a foreign company or partnership which carries on part of its business in the UK - see also below under 'Extra-Territorial Scope') will be guilty of this offence where:

·                     a person who performs services for it;

·                     bribes another person;

·                     intending to obtain or retain business or a business advantage for the company or partnership; unless

·                     the company or partnership can show in its defence that it has in place "adequate procedures" designed to prevent such persons from engaging in bribery. (See section 7 of the Act.)

The meaning of "adequate procedures" is considered further below. 

Note that:

•           this offence may apply to bribes paid anywhere in the world; and

•           irrespective of whether the company or partnership knows about
            the bribes.

Accounting Records

5.         In addition to the above, UK company laws require that proper accounts and records be kept of transactions. Thus, an accounting entry which misleadingly disguises a bribe could lead to criminal and other sanctions.

Extra-Territorial Scope 

6.         Each of the first three offences above applies to acts committed overseas (as well as to acts in the UK) provided the offender is a British citizen or is ordinarily resident in the UK, or is a UK company.

7.         The jurisdictional reach of the corporate offence of failure to prevent bribery is broader. As indicated above, it may apply to bribes paid anywhere in the world by any person performing services for the company.  There are two aspects to the extra-territorial reach of this offence:

(i)                   Application to commercial organisations carrying on part of a business in the UK

            As indicated above the corporate offence applies not just to UK companies but also to non-UK companies and partnerships which carry on part of their business in the UK.  There is no definition in the Act of what is meant by the phrase "carrying on part of a business in the UK". 

The Guidance (see below under 8) provides some clarification on what should constitute carrying on part of a business in the UK noting, in particular, that the mere fact that a company's shares are traded on the London Stock Exchange should not, in itself, be enough to bring that company within the scope of the Act. Similarly, having a UK subsidiary will not, of itself, mean that a parent company is itself carrying on a business in the UK.  However, the Guidance states that it will be for a Court to make the final judgment on this issue and companies will need to look carefully at what they do in the UK.

(ii)                 Application in respect of those performing services for a company

The corporate offence makes a company liable for the acts of persons who perform services for it.  This phrase has a potentially wide meaning.  Apart from employees, it could include agents, representatives and even suppliers, joint venture entities or partners and fellow Group companies.  It is a question of fact whether a person is "performing services" for a company.

The Company's anti-corruption procedures need to be adequate to prevent bribery by all those "performing services" on its behalf anywhere in the world.

What are "adequate procedures"?

As mentioned, the defence for the organisation will be to prove that it had "adequate procedures" designed to prevent the bribery.

8.         There is no definition in the Act of what constitutes "adequate procedures".  However, the government has issued some Guidance as to what is meant by this concept. For further details of the Guidance, see the anti-corruption e-bulletin that is prepared by the corporate crime and investigations team of Herbert Smith and which is available here.

9.         The Guidance is not intended to be prescriptive and simply sets out a number of principles to help an organisation determine what procedures are appropriate for it.  This flexibility is intended to address the unfairness and impracticality of having "one size fits all" requirements for all sizes and types of business. 

10.        The Guidance focuses on practical implementation of policies to ensure that ethical compliance is embedded in an organisation's culture and monitored effectively.

11.        The Guidance outlines six core principles which should inform the anti-corruption procedures put in place by a company.  These are:

·                    Proportionate procedures – the procedures should be proportionate to the bribery risks faced by the company and to the nature, scale and complexity of the company's activities.

·                    Top level commitment – the senior directors and managers of the company should be committed to preventing bribery by all persons performing services for the company and to fostering a culture within the company in which bribery is never acceptable.

·                    Risk assessment – the company should assess the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons performing services for it on a regular basis and should document that process.

·                    Due diligence – the company should apply due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform services for it in order to mitigate identified bribery risks.

·                     Communication (including training) – the company should seek to ensure that its anti-corruption policies and procedures are embedded and understood throughout the company through internal and external communication, including training that is proportionate to the risks it faces.

·                     Monitoring and review – the company should monitor and review its anti-corruption procedures and make improvements where necessary.

Contact information

If you have any questions regarding this corporate alert, please do not hesitate to contact one of the Stibbe contacts or Herbert Smith.

© Stibbe 2011

Note: This alert is only a broad outline of subject matters discussed herein. It is not intended to constitute legal advice by Stibbe for a specific matter. Please approach Stibbe for specific legal advice tailored to your particular circumstances.

Stibbe, Herbert Smith LLP and Gleiss Lutz are three independent firms which have a formal alliance.